Google, Blocked in China, Takes Another Route Into the Country

Alphabet Inc. (NASDAQ: GOOGL) has struggled to get mainstream search engine status in China. Stymied by the government and local search engine company Baidu Inc. (NASDAQ: BIDU), it has never made real progress. Its latest move is to buy into China’s online market.

Google has made a $550 million investment into Chinese online auction company JD.com Inc. (NASDAQ: JD).

Karim Temsamani, Google’s President, Asia-Pacific Operations, wrote:

The Asia-Pacific region is one of the largest and fastest growing ecommerce marketplaces in the world. People in Southeast Asia alone are expected to spend $88.1 billion online by 2025. These consumers in Asia-Pacific are ready to buy, but hard to please. The growth of access to the internet and online retail has led to rising expectations for top-notch experiences at every step of the shopper’s journey.

That’s why we’re excited to announce a new strategic partnership with JD.com, one of the world’s leading ecommerce companies. As part of this partnership, we will invest $550 million in JD.com. We want to accelerate how retail ecosystems deliver consumer experiences that are helpful, personalized and offer high quality service in a range of countries around the world, including in Southeast Asia. By applying JD.com’s supply chain and logistics expertise and our technology strengths, we’re going to explore new ways retailers can make shopping effortless for their consumers, giving them the power to shop wherever and however they want.

JD.com will become part of the Google Shopping system, but that seems like little more than an afterthought in the transaction.

Research firm Global Statistics recently put Google’s China market share at less than 1.5%. Baidu’s is 70%, and local search company Shenma has 17%. This contrasts with Google’s 86% share in the United States and 91% in Europe. The Chinese market is not one Google can afford to ignore. Over 770 million people are online in China. In the United States, that number is 286 million, although the measurement in the two countries is done differently.

What does Google get from its investment in JD.com? Not very much, if it ever wants a real place in China’s internet business. It will have to settle with an investment in a proxy, which may make it money at arm’s length, but that is all.